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Tag: finance

  • Last Week’s Financial Round-up 08/09/25

    Gold pricing reached a new peak above $3500, alongside an 8.10% expansion in equity from Fresillo, a Mexican silver mining company incorporated in the UK which was one of the week’s high performers and infrastructural investment represents an effective counterpoise to gold contracts.

    According to the Times, growth obstacles for UK listed companies comprising “tax rises, slowing wage growth and sticky inflation” are affecting several service providers.

    Bunzl, for example, which sells PPE and sanitary equipment to healthcare and health and safety providers, as well as packaging, was poised to take advantage of new overseas markets as M&A revenue and adjusted operating profit for the year increased 7.9% with conversions indicated 3.1% revenue growth on an 8.3% operating margin.

    In its annual report, Costain reported cash from operations in FY24 was £41.7mn, (FY23: 69.6mn), resulting from “increased operating profits offset by year-end timings of certain cash receipts at the end of year FY23 and FY24, together with some end of contract outflows in FY24.”

    The company cited the “timing of year-end working capital” as well as “higher tax and capital expenditure payments” on investment in new systems and “higher cash flows on adjusting items”, although meeting the pension contribution deficit may have a detrimental effect on liquidity.

    Inflation proxy indicators

    Indeed, the CPI for July stood at 3.8%, up from 3.6% for June. The RPI, excluding the costing change in fuel and energy, was 4.8% for July, an increase from 4.4% yoy growth for June. The Producer Price Index (PPI) provides forward-looking outlooks of upcoming price increases based on slack vs actively engaged capacity, and acts as a measure of manufacturing inflation.

    The Purchasing Manager Index (PMI) provides an indication of future orders and growth outlook based on forward-looking pricing on manufactures and services.

    Trump’s foreign policy this month have not affected appetite for US 10-year Treasuries, which were stable as the return on Treasury bills, which must be held for 10 years until maturity, increased by 1bp from 4.27to 4.28.

    The coupon paid out on UK 10-year gilts rose from a yield of 4.84 the preceding week to 4.90 correct as of 2 September, reflecting market speculation surrounding suggested tax cuts to be announced in the Budget on 26 November, which may contain a new wealth tax to meet the current spending shortfall.

    Note that the Sentix Investor Sentiment Index, published today on forexfactory, was at -9.2 vs a forecast of -2.2; whereas the forecast for August was actually positive, and forward-looking analysts put the prediction at 6.2 where the actual value, predicated on a diffusion index based on surveyed investors and analysts, was -3.7.

  • Analysis of Developing country debt finance initiatives, with the outcome of the 2025 Sevilla Conference 13th June to 3rd July.

    Key points: 

    • 93% of the most Climate Vulnerable Countries (CVCs) face a debt crisis. 
    • Many spend up to 5x the amount of budget allocated to addressing climate change on serving debts. 

    One case study is Kenya, which after the pandemic in 2020 applied via the IMF for an austerity funding package, and was forced to cut public spending by 15%. 

    Nowadays, 35% of its debt is to private creditors such as Citigroup, Standard Bank and BlackRock. These lenders charge interest rates of up to 10.4%. 

    A recent Oxfam report found that for every $1 the IMF recommended low-income countries spend on public goals that promote development and wellbeing, they were instructed to cut four times more via austerity measures. 

    Another case study is Sierra Leone, where overseas capital after the civil war meant its public debt swelled from $1.2bn in 2002 to $1.9bn in 2022. Around 73% of the country’s foreign debt is owned by multilateral institutions such as the World Bank and the IMF, which refused to grant debt relief.  

    The value of its currency has depreciated 50% in 2023. Public spending was slashed in the aftermath. Almost 70% of children in Sierra Leone live in poverty, with parents unable to afford school fees. 

    In 2020 the UK passed the Debt Relief (Developing Countries) Act, which impelled private creditors to engage in debt relief under the 1996 heavily indebted Poor Countries (HIPC) initiative. 

    “A subsequent government review found the legislation to have been a success and to have had no adverse consequences for the UK economy. With the HIPC initiative now outdated, new legislation is urgently needed to apply to the current G20 Common Framework.” 

    p.12 ‘Jubilee 2025 – the New Global Debt Crisis’ 

    The Jubilee 2025 global debt crisis report calls for Special Drawing Rights – a financial tool composed of a diversified basket of widely traded currencies – to be more widely available. 

    (see ‘Public Climate Finance provided: an analysis by financial instrument’, 2020/ ‘Climate Finance Provided and Mobilised by Developed Countries in 2016-20′ 

    Finance by private lenders often comes with onerous interest rates due to the perceived risk of the investment, yet when the borrower defaults private venture capitalists refuse to engage in debt relief, leaving governments and multilateral lending facilities to finance the cost of bailout. 

    Climate change finance in 2020, according to OECD data, comprised just 26% in grants vs loans which have coupon payments priced in on the input capital in a forward-looking structure to make profit from the cost of capital.  

    OECD figures capture four distinct components of climate finance provided and mobilised by developed 

    countries: (i) Bilateral public climate finance provided by developed countries’ bilateral agencies and 

    development banks; (ii) Multilateral public climate finance provided by multilateral development banks and 

    multilateral climate funds, attributed to developed countries; (iii) Climate-related officially supported export 

    credits, provided by developed countries’ official export credit agencies, and (iv) Private finance mobilised 

    by bilateral and multilateral public climate finance, attributed to developed countries. 

    The report was jointly prepared by the OECD’s Environment and Development Co-operation Directorates. 

    It also benefited from dedicated 2020 data inputs by the OECD Trade and Agriculture Directorate (for the 

    majority of export credits) as well as donor countries (provision of 2019-2020 bilateral public climate finance 

    in advance of UNFCCC reporting, delayed to later in 2022). 

    Key findings: 

    Recap of 2020 figures and aggregate trends 

    USD 83.3 billion was provided and mobilised by developed countries for climate action in 

    developing countries in 2020. While increasing by 4% from 2019, this was USD 16.7 billion short 

    of the USD 100 billion per year by 2020 goal. 

     In 2020, public climate finance (both bilateral as well as multilateral attributable to developed 

    countries) grew and continued to account for the lion’s share of the total (USD 68.3 billion or 82%). 

    Private finance mobilised by public climate finance (USD 13.1 billion) decreased slightly compared 

    to earlier years, while climate-related export credits remained small (USD 1.9 billion). 

    Mitigation finance still represented the majority (58%) in 2020, despite a USD 2.8 billion drop 

    compared to 2019. Adaptation finance grew, in both absolute (USD 8.3 billion increase compared 

    to 2019) and relative terms (34% in 2020 compared to 25% in 2019). Such an increase is, to a 

    great extent, the result of a few large infrastructure projects. Cross-cutting activities remained a 

    minority category (7%) almost exclusively used by bilateral public providers. 

     Mitigation finance focused mainly (46%) on activities in the energy and transport sectors. In 

    contrast, adaptation finance was spread more evenly across a larger number of sectors and 

    focused on activities in the water supply and sanitation sector, and agriculture, forestry and fishing. 

    As in all previous years, loans accounted for over 70% of public climate finance provided (71% or 

    USD 48.6 billion in 2020, including both concessional and non-concessional loans). The share of 

    grants was stable compared to 2019 (26% or USD 17.9 billion). Public equity investments 

    continued to be very limited. 

     Over 2016-2020, climate finance provided and mobilised mainly targeted Asia (42%) and middleincome 

    countries (43% and 27% for lower- and upper-middle-income countries respectively). 

    Further, 50% of the total was concentrated in 20 countries in Asia, Africa and the Americas that 

    represented 74% of all developing countries’ population. 

    Mobilisation of bi-lateral finance initiatives depend on indigenous institutions’ ability to structure project finance deals with repayments assured, in meeting creditors’ requirements for return on principal by integrating multiple funding channels as each project enters its operational development phase. The loan may be collateralised with the cost of equipment subject to fixed or floating charges, and revenue streams must be channelled appropriately via so-called ‘waterfall’ or ‘mezzanine’ financing.  

    The report states that 

    Grants represented a much higher share of finance for adaptation and cross-cutting activities than for mitigation between 2016 and 2020. Grants typically support capacity building, feasibility studies, demonstration projects, technical assistance, and activities with low or no direct financial returns but high social returns. Public climate finance loans are often used to fund mature or close-to-mature technologies as well as large infrastructure projects with a future revenue stream, which are predominant for mitigation finance as well as in middle-income countries. 

    Grants represented a larger share of climate finance for SIDS, LDCs and fragile states, compared to developing countries overall. Countries within these three categories often present economic and socio-political conditions that do not favour loan-based finance due to limited absorptive and repayment capacity. Recipient institutions and projects in middle- and high-income countries tend to have a relatively higher capacity to seek, absorb, deploy and repay loans. 

    A common fallacy is that development finance is often mis-allocated or appropriated by illegitimate and/or corrupt regimes. In fact, after the Jubilee 2000 campaign for fair development finance, in nations where debts were cancelled the proportion of children finishing primary school went from 45% to 66%, the report claims. 

    The Jubilee 2025 report calls for the following actionables: 

    1. Private creditors legislation to be updated. 
    1. Systemic change of the IMF ensuring fairer (more proportional) allocation of voting rights. 
    1. A public global debt registry, to hold all borrowers and lenders accountable.  

    “Legislators in key financial centres like the UK and New York could introduce requirements that make loan enforceability contingent about timely disclosure in the registry. It should be independent from lenders and borrowers and could sit within a UN framework.” 

    Cites EURODAD, Bogota Declaration, 2023 (see extracts below) 

    1. Automatic debt cancellation following a natural disaster or economic crisis. 
    1. Comparable treatment for all creditors. A system to be introduced whereby those setting lower interest rates on repayment not to be required to service debt relief in the same proportion as those setting higher repayment rates. 
    1. A new global debt framework, as with the 2023 UN Tax Framework Convention, passed by the UN General Assembly, where the 4th International Financing for Development Conference timetabled for June 2025 could provide a springboard for further legislative change. 

    Global south CSOs demand justice and a change to the rules on debt and financial architecture – Eurodad 

    The poly-crisis facing Global South countries is reversing hard-won gains in poverty reduction as deep fiscal consolidation and austerity programmes dominate macroeconomic policy. Global debt policies launched by the IMF and the G20 failed, and many Global South countries are required to service multilateral, bilateral, and private sector debt crippling their ability to respond to domestic socio-economic pressures, and in effect de-invest in public services. 

    Global South’s constraints are both historical and contemporary. The colonial and neocolonial order continue through soft diplomacy and drip dependency in the form of official development assistance, foreign direct investment, and the promises of billions from the Global North private sector; coated with policy interventions that have seemingly targeted creating a hospitable environment for foreign capital to enter and exit Global South with minimal values being retained on Southern countries. This extractivism in policy advice has been long argued as contributing to the underdevelopment of the Global South. 

    We are alarmed that Southern countries remain locked in a vicious cycle of debt, climate, and extractivism, which deepens their dependence on commodities, increases environmental harm, and at the same time, sustains the uneven power structures between North and South, between lenders and borrowers…. 

    The 70 delegates assigned to the Bogota declaration, which was hosted by Columbia on 20-21 September 2023, represented experts and activists from civil society organisations, social campaigners, 

    and pan-national networks . 

    We, as CSOs and networks that historically work on debt across the globe, demand to 

    decision makers at national, regional, and global levels: 

    • Reform of the global debt architecture that addresses unsustainable and illegitimate 

    debts, by bringing transformative change to the current unfair and persistently 

    unbalanced rules. Towards this end, we further demand: 

    OUTPUT DOCUMENT 3 

    o Automatic debt service cancellation mechanism that protects countries of 

    the Global South from extreme events related to political, climatic, 

    environmental, economic, and security shocks. 

    o Improved debt contracts aligned with responsible borrowing and lending 

    principles, including state contingent clauses, such as climate or pandemic 

    clauses. 

    o Binding responsible lending rules for all creditors, including private lenders of 

    sovereign debts. 

    o The elimination of austerity and fiscal consolidation measures and IFIs’ 

    conditionalities. 

    o Advance towards the establishment of a fair, independent, transparent, timely 

    and binding multilateral framework for debt crisis resolution (under the 

    auspices of the UN and not in lender-dominated arenas). 

    Recent data publicly available on lending structures in Sierra Leone reported that the share of development cooperation that used budgeting execution procedures was 1 in a ratio of 1 to the use of auditing procedures. However, financial reporting procedures were used by 0 participants in PFM systems, and just 0.21 used procurement systems.  

    Forward spending plans were not dated more than 1 year in advance, with medium-term spending forecasts of two to three years virtually nonexistent, although the share of development cooperation on the national budget was at a ratio of 1:1:1 comprising reporting to the international management system, reporting at the expected frequency, and provision of the information requested. 

    The extent of parliamentary oversight on development cooperation stood at a ratio of 0.5:1 with respect to the regular provision of development information to parliament. The share of development cooperation reported on the international budget was 0, although the legal and regulatory environment for CSO was recorded at 0.75, resulting in CSO development effectiveness rated at 0.63. 

    The Sevilla Platform for Action on debt relief, resulting from the global consultation and consensus from the 13th June to the 3rd July, follows while the International Business Program alongside the development aid review assembled private sector stakeholders to ensure they are engaged with decision making related to debt structuring, project finance and initiatives to enhance global trading links. 

    The manifesto states its mandate (to): 

    1. To catalyze investments at scale and close the SDG financing gap, initiatives will help countries mobilize tax revenue; scale up blended finance, including guarantees, and local currency lending by MDBs; and increase financing for crisis response. 
    1. To address debt challenges, initiatives include a global hub for debt swaps for development; a ‘debt pause clause alliance’ to incorporate such clauses in lending; and a borrowers’ forum. 
    1. To support architecture reform at national and global levels, initiatives include a coalition of countries and institutions for country led and owned platforms; a coalition of countries that will include measures of vulnerability beyond GDP in all financing operations; and efforts to update the role of development cooperation at the global level. 

  • Capital Gains Tax Exemptions. Learn how to avoid CGT on qualifying investments and settlements

    All assets are regarded as chargeable assets except for those which are specially exempted from CGT. The main exemptions are as follows: 

    1. A taxpayer’s private residence 
    1. Motor cars, including vintage and veteran cars (although not personalised numberplates) 
    1. Items of tangible, removable property (referred to as “chattels” which are disposed of for £6,000 or less. 
    1. Chattels with a predictable useful life of 50 years or less, unless used as business and eligible for capital allowances (Chapt 19) 
    1. Gilt-edged securities and qualifying corporate bonds (Chapt 20) 
    1. National Savings Certificates and Premium Bonds 
    1. Foreign currency (if acquired for private use) 
    1. Winnings from pools, lotteries, bettings etc 
    1. Decoration for valour (unless purchased by acquirer) 
    1. Damages on compensation received for personal or professional injury and compensation for mis-sold personal pension schemes 
    1. Life insurance policies (unless purchased by a third-party) 
    1. Shares in a Venture Capital Trust (Chapt.6) 
    1. Investments held either in an Individual Savings Account (ISA) or a Child Trust Fund (Chapt.60 

    2012-13, the max capital allowance of an ISA was capped at £11,280. Notes interest and dividends arising from ISAs are exempt from income tax. Capital gains (and losses) arising from ISAs are exempt from CGT. 

    Notes 2 types of ISA: 

    1. Cash ISA is deposited with a bank or building society and is held in a savings account. 
    1. Money investment in a stocks & shares ISA is used by the ISA provider to acquire stocks & shares on the saver’s behalf. 

    Venture Capital Trusts 

    A Venture Capital Trust (VCT) is a company which is approved as such by HMTC. The main conditions which must be satisfied before IMRC approval can be obtained are as follows: 

    1. The company’s ordinary shares must be listed on an EU stock exchange 
    1. Its income must be derived wholly or mainly from shares and securities and no more than 15% of this income may be retained by the company 
    1. At least 70% of its total investments must consist of “qualifying holdings” and at least 70% of these holdings must consist of “eligible shares”. Broadly, shares or securities owned by a VCT rank as qualifying holdings if they were newly issued to the VCT and are shares or securities of a company which would be a qualifying company for the purposes of the EIS (Enterprise Investment Scheme). Eligible shares exclude redeemable shares. 
    1. No holding in any one company (other than in another VCT) can represent more than 15% of a VCT’s investment. At least 10% of a VCT’s investment in a company must be held in the form of eligible shares. 

    Income tax relief is available to taxpayers who subscribe for newly-issued shares of a VCT. This takes the form of a tax reduction equal to 30% of the amount invested, subject to an investment limit of £200,000 per tax year. This reduction takes priority over the tax reductions relating to certain payments by the taxpayer (see Chapt.4) and the tax reduction relating to the MCA (see Chapt.3) To qualify for income tax relief, the taxpayer must hold the shares for a minimum holding period of at least 5 years. 

    Dividends on the first £200,000 of VCT shares acquired in each tax year are exempt from income tax and any capital gain or loss arising from the disposal of these shares is exempt from capital gains tax, regardless of whether or not the shares have been held for the minimum holding period. 

    Enterprise Investment Scheme (EIS) 

    *Dividends on the scheme are subject to income tax in the usual way* 

    a) Income tax relief is available to taxpayers who subscribe to newly issued ordinary shares in “qualifying cos”. Features include: 

    – less than 250 employees 

    – permanent establishment in UK and have gross assets not exceeding £15mn immediately before the share issuance, and not exceeding £16mn immediately after it. 

    – the co. Must have raised no more than £5mn under the EIS and other venture capital schemes in the previous 12 months. 

    b) A taxpayer’s EIS investments of up to £1mn in tax each year are subject to tax relief. 

    c) Relief takes the form of a reduction in the amount of tax due to the taxpayer’s chargeable income equal to 30% of the amount invested in qualifying cos during the year. This reduction takes priority over the tax reductions relating to certain payments (Chapt.4) and MCA (Chapt.3) 

    d) The taxpayer must not be connected to the co. At any time during the two years prior to the date of the investment and the three years following the date. Broadly speaking, an individual is connected with a company for this purpose if he or she is an employee of the co, or, together with associates, owns more than 30% of the co’s ordinary shares. 

    1. Any capital gain arising on the eventual disposal of the shares is exempt from CGT but any loss arising on the disposal is eligible for relief, and the loss may be relieved: 
    1. As a capital loss, in the usual way or 
    1. Against the taxpayer’s total income for the year in which the loss is incurred after the prev. Year (see Chapter 12) 

    When calculating the allowable loss, the shares are deemed to have been acquired for their issuance price, less the tax reduction obtained when shares were purchased. 

    The taxpayer must retain the shares for a minimum holding period of at least 3 years or both the income tax and capital gains tax reliefs are lost. 

    Seed Enterprise Investment Schemes 

    The money raised by the new share issue must be spent within 3 years of the share issue. You must spend the money on either: 

    a qualifying trade 

    preparing to carry out a qualifying trade 

    research and development that’s expected to lead to a qualifying trade — such as a project to make an advance in science or technology 

    You cannot use the investment to buy shares, unless the shares are in a qualifying 90% subsidiary that uses the money for a qualifying business activity. 

    1. Subject to certain conditions tax relief is available to investors who subscribe to ordinary shares in a co. which is carrying on a new business, although not one which started more than two years before the share issue.  
    1. The co. Concerned must be an unlisted trading company with a permanent establishment in the UK, have fewer than 250 employees and its assets less than £200,000 before the SEIS investment is made. Also, the amount of all SEIS investment received by the company must not exceed £150,000 (correct as of last published edition of Alan Melville’s ‘Taxation’ 2012-13. 
    1. During the period from the co’s incorporation until the third aniversary of the share issuance, the investor must not own more than 30% or more of the co’s share capital, or be an employee of the company other than the director. 
    1. Tax relief takes the form of an income tax reduction equal to 50% of the amount invested up to a limit of £100,000 p.a. 

    *As with the main EIS, any SEIS investments made during a tax year may be carried back and treated as if made in the previous years. 

    Income from Trusts and Settlements 

    A trust or settlement is an arrangement whereby property is held by persons known as trustees, for the benefit of persons known as beneficiaries. This fall into two main categories: 

    1. If one or more persons are entitled to receive all the income which is generated by the trust property, then those persons are “life tenants” and the trust is a “trust with an interest in possession”. 
    1. If there is no life tenant and all the trustees have the discretion to distribute as much or as little of the trust income to the beneficiaries as they see fit, the trust is referred to as a “discretionary fund”. 

    Trusts with Vulnerable Benificiary 

    This special tax regime ensures that the tax liability of this type of trust is reduced to the amount of tax that would have been payable if the trust income and gains had accrued directly to the beneficiary concerned. 

    A “vulnerable beneficiary” may be either a disabled person or (in certain circumstances) a minor. Trustees who wish to claim the special tax treatment available under this regime must make an appropriate election to HM Revenue and Customs. Once made, such an election is irrevocable.